asset summary

asset code EN-MY-SH-PALM-2017-001
asset description 40% Shareholdings of Palm Oil Plantation, with profit sharing agreement of net business profits proportional to shareholdings percentage, on a quarterly basis.
category Energy
type Shareholder – Profit Sharing
validity Ongoing without Expiry / Maturity
asset code EN-ID-SH-PALM-2017-001
asset description 49% Shareholdings of Palm Oil Plantation, with profit sharing agreement of net business profits proportional to shareholdings percentage, on a quarterly basis.
category Energy
type Shareholder – Profit Sharing
validity Ongoing without Expiry / Maturity

Asset Code Format:

  • Category Code: EN for energy, IN for infrastructure, UT for utilities and amenities, IT for internet related, TG for new technologies and technological applications, ED for education and CL for cultural.
  • Country Code: 2 letters, the internationally recognized country code.
  • Asset Type: SH for shareholdings, DO for direct ownership, PS for profit sharing agreement, LN for loans and debt, PD for financial product.
  • Asset Name: 4 letters assigned to asset, which is unique to this code only.

 

Background and Market

Palm oil is an edible vegetable oil derived from the mesocarp of the fruits of the oil palms. After various processes of refining, palm oil can be used as an edible vegetable oil. In the recent decades, due to the nature of palm oil being renewable, it has been used as the foundational building block for modern day biodiesel.

The world’s largest refinery plant for such biodiesels is sited at Finnish operated Neste Oil biodiesel plant in Singapore, which takes in CPO and RBDPO from Indonesia and Malaysia, the largest exporting countries for palm oil.

Since the announcement of the Belt and Road Initiative in 2013, and subsequent contracting of various infrastructural projects along those economic regions, we have seen the stark rise of palm oil prices, from USD 483 to USD 706 per metric tonne.

The price increase in largely attributed to the sudden increase in demand for Biodiesels derived from Palm Oil. With China being the world’s largest palm oil importer, and with its trains and trucks reliant on palm oil, the Belt and Road initiative and sudden investments into construction and infrastructure has led to the sudden demand of this fuel source by contracted companies with vested interests in the region.

In May 2017, Indonesian authorities have pledged to double the production of palm oil over the next 15 years, to meet the demands for this base fuel abroad. With no replacement for diesel and fossil fuels in sight for the near future, we can expect the prices and demand of palm oil to continue on the upward trend, given the continual demand created by the Belt and Road Initiative.

 

Investment and ROI

Cirro Capital Limited has made a direct investment of USD 5,000,000, for the acquisition of a 40% stake of a plantation sited in Malaysia. The investment is based on the following terms:

amount USD 5,000,000
shareholdings 40%
plantation description 2,034 hectares of Oil Palm Trees (Elaeis guineensis jacq.)
Annual Production Rate
  • 7,868 metric tonnes (Palm Oil)
  • 1,386 metric tonnes (Palm Kernel Oil)
Annual Revenue Est USD 5,549,166 (As of Dec 2016)
Annual Profit Est USD 4,161,874 (As of Dec 2016)
Annual Investment ROI Est USD 1,664,749 (As of Dec 2016)
Annual Investment ROI Rate (%) 33.2%

Cirro Capital Limited has made a direct investment of USD 2,200,000, for the acquisition of a 49% stake of a plantation sited in Indonesia. The investment is based on the following terms:

amount USD 2,200,000
shareholdings 49%
plantation description 998 hectares of Oil Palm Trees (Elaeis guineensis jacq.)
Annual Production Rate
  • 4,720 metric tonnes (Palm Oil)
  • 661 metric tonnes (Palm Kernel Oil)
Annual Revenue Est USD 3,332,320 (As of Dec 2016)
Annual Profit Est USD 2,665,856 (As of Dec 2016)
Annual Investment ROI Est USD 1,306,269 (As of Dec 2016)
Annual Investment ROI Rate (%) 59.4%

 

Exit Strategy

Given the limited supply of palm oil worldwide and the increased demand of biofuels spurred by the Belt and Road initiative and infrastructural and logistical requirements in related regions, we expect the overall increase in palm oil prices to continue to prevail over the next few years.

This will drive interests in commodity speculation, attracting latecomer investors, both private and institutional. We plan to sell our stake in the business after 5 years to such investors.